As the largest consumer of iron ore, China’s strong demand has enabled international mining giants to make a lot of money. However, the recent changes in iron ore prices have attracted the attention of regulatory authorities.
In February 11th, the NDRC disclosed in the official account that the price competition of the national development and Reform Commission and the market supervision bureau, the price supervision and Competition Bureau of the national development and Reform Commission, was recently launched by a joint research team to conduct some research on iron ore market supervision.
According to the information released by the national development and Reform Commission, the research group will focus on the recent changes in iron ore inventory and the participation of relevant enterprises in iron ore futures and spot trading, listen to the opinions and suggestions of relevant parties on strengthening the linkage supervision of futures and spot market, and severely crack down on the fabrication and dissemination of price increase information, hoarding and speculation, bid up prices and malicious speculation.
A number of insiders told the reporter of the daily economic news that although the expectation is good, China’s steel demand has not increased significantly, which can not form the support for the rapid rise of iron ore prices. The hype factors of this round of rise should not be underestimated, which is also the reason why the competent authorities have made rapid efforts.
It is worth noting that after the voice of the regulatory authorities, the bulk commodities represented by iron ore responded quickly. On the night of February 11, most commodity futures prices fell. The main futures of iron ore closed down 7.62%, soda ash closed down about 4.98%, and PVC and glass also fell more than 4%
source: WeChat official account screenshot
Supply increases, but iron ore prices are changing
The voice of the regulatory authorities on Friday is the second action of the two departments on iron ore this week. Not only iron ore, but also the rise in coal prices. This week, relevant departments also made timely efforts to interview relevant enterprises and strive to ensure supply and stabilize prices.
On February 9, in view of the recent changes in iron ore prices, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the State Administration of market supervision jointly interviewed relevant iron ore information enterprises. The national development and Reform Commission and the State Administration of market supervision said they would strengthen market supervision and severely punish illegal acts such as fabricating and disseminating price increase information and bid up prices.
On the day of the official account, the Esteel point steel net, which was operated by the Shanghai point steel Agel Ecommerce Ltd, said in a clarification statement that the information on the mine delivery described in its article issued in January 27th was false.
Rio Tinto’s “Atlas” statement about the reduction and the information about the “Atlas” company’s “Atlas” statement are not available, and the “Atlas” company’s “Atlas” statement about the reduction is not available. The Company Apologizes for the serious adverse impact and has deleted previously published articles
source: WeChat official account screenshot
According to the statistics of the General Administration of customs, China imported 1124315000 tons of iron ore and its concentrate in 2021, a year-on-year decrease of 3.9%. It is also reported that from the perspective of iron ore supply, the shipment target of the four mines in the fiscal year 2022 shows that the shipment volume of iron ore in 2022 will increase to a certain extent.
The tracking data of Lange steel network shows that the shipment increment of Rio Tinto and BHP Billiton is about 8 million ~ 10 million tons; FMG shipping increment is relatively small, with 1 million tons, and vale shipping increment is about 10 million tons. Overall, it is estimated that the annual increment of the four mines will be 28 million tons in 2022, an increase of about 2.5%.
From the supply side, China’s iron ore resources are relatively abundant. According to Wande data, as of the week of February 11, the total iron ore inventory of 45 ports in China was 158.9 million tons, an increase of about 1.6 million tons month on month, continuing to reach a new high since June 2018.
Wang Guoqing, director of Lange Iron and Steel Research Center, told the daily economic news that with the increase of supply, the supply-demand relationship in the imported iron ore market will tend to be loose in 2022, and the overall price will be significantly corrected.
However, since late November 2021, the iron ore market has continued to fluctuate upward. Relevant data show that since mid November last year, the largest cumulative rebound in iron ore prices has reached 60%, rising from the low of 512 yuan per ton in mid November to 829 yuan per ton on the last trading day before the Spring Festival this year.
On January 28, the national development and Reform Commission issued a document saying that the market price of iron ore has risen sharply recently, and there have been abnormal fluctuations for many times during this period. According to the analysis of relevant parties, at present, the supply and demand of iron ore market is generally stable, China’s inventory is at a high level for many years, and the price has risen too fast recently, which is hyped.
Under pressure at both ends, the profit growth rate of steel enterprises fell
In sharp contrast to the rise in iron ore prices, the spot market price of steel did not follow up, and the price basically maintained the current level.
It is worth noting that since November 2021, with the sharp rise in the price of imported iron ore, the cost of steel enterprises has increased again, superimposed with the continuous bottom shock of the steel market and the significant year-on-year decline in steel production and sales, and the profits of steel enterprises have been significantly squeezed.
According to the data of the National Bureau of statistics, in November 2021, the monthly profit of ferrous metal smelting and rolling processing industry was only 8.38 billion yuan, a month on month decrease of 31.95 billion yuan and a year-on-year decrease of 19.55 billion yuan.
Up to now, a number of listed iron and steel enterprises have released 2021 annual performance express, and the expected profits of most steel enterprises have reached a record high.
For example, Baoshan Iron & Steel Co.Ltd(600019) (600019, SH) performance forecast said that the company’s net profit attributable to shareholders of Listed Companies in 2021 is expected to increase by 10.9 billion yuan to 11.3 billion yuan, an increase of 86% ~ 89% year-on-year. Jiangsu Shagang Co.Ltd(002075) (002075, SZ) 2021 annual performance forecast shows that the net profit attributable to shareholders of listed companies is expected to be RMB 900 million-1.215 billion, an increase of 38.56% ~ 87.06% over the same period of last year.
But we should also see that the profit trend of steel enterprises last year was downward. Wang Guoqing told the daily economic news: in 2021, benefiting from the improvement of the prosperity of the iron and steel industry, the net profits of listed iron and steel enterprises attributable to the company’s shareholders increased significantly. In the second half of the year, the profits of listed iron and steel enterprises gradually weakened due to the decline of demand and output control.
In fact, from the annual performance forecast, compared with the first three quarters, the growth rate of revenue and profit of listed steel enterprises in 2021 generally slowed down, and the profit weakened in the fourth quarter. Baoshan Iron & Steel Co.Ltd(600019) the net profit attributable to the parent company in the first three quarters increased by 174.53% year-on-year, while it is expected to increase by 86% ~ 89% year-on-year in 2021, and the growth momentum is insufficient.
Behind the lack of stamina of the enterprise’s performance in the fourth quarter is the decline of steel prices. In the fourth quarter of 2021, the steel market price showed a trend of stabilization after rapid decline, and the average price was significantly lower than that in the third quarter. According to the monitoring data of Lange steel cloud business platform, the price of Lange steel composite index was 5386 yuan / ton in the fourth quarter, which increased significantly compared with the same period of last year, but decreased by about 400 yuan / ton compared with the third quarter.
A steel market person told the daily economic news that since January this year, the terminal demand for steel has been weak, but with the introduction of steady growth policies, the improvement expectation of steel demand has increased, and the overall steel market price has risen steadily. At present, the profits of main steel varieties have remained at a relatively good level, and the profits of listed steel enterprises are expected to be relatively stable in the first quarter.
“As a cyclical industry, the profit volatility of iron and steel enterprises is very obvious. With the change of demand structure, the rapid promotion of industry merger and reorganization, the pricing ability of leading enterprises will be improved, and the periodicity of the industry will be weakened. The profit of iron and steel enterprises may be relatively stable in 2022, especially the leading enterprises in the industry are expected to cross the cycle and maintain a good level of profit.” Wang Guoqing said.
